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Employment trend indicative of further cash rate decline

  • January 07 2020
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Borrow

Employment trend indicative of further cash rate decline

By Grace Ormsby
January 07 2020

Progress towards full employment has stalled in the last six months, according to an economist who expects a flow-on effect to be reflected in changes to the cash rate in coming months.

Employment trend

Employment trend indicative of further cash rate decline

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  • January 07 2020
  • Share

Progress towards full employment has stalled in the last six months, according to an economist who expects a flow-on effect to be reflected in changes to the cash rate in coming months.

Employment trend

Commenting on ABS Labour Force data at the end of last year, Dr Sarah Hunter, BIS Oxford Economics’ chief economist, said that looking at the labour market’s underlying trends, the workforce participation rate has fallen back as unemployment rates and underemployment rates both plateaued.

She forecast that wage growth is unlikely to reach 3 per cent year-on-year in the next 12 to 18 months, limiting the upward pressure on price inflation, and suggesting “a softer pace of growth in employment in the near term”.

As a result, Dr Hunter said she expects the Reserve Bank of Australia to cut the cash rate again early in 2020, taking it to 0.5 per cent.

“And if there are signs that conditions are deteriorating, we would expect the RBA board to implement further loosening (possibly including quantitative easing),” she concluded.

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Employment trend indicative of further cash rate decline
Employment trend
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About the author

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Grace is a journalist on Momentum Media's nestegg. She enjoys being able to provide easy to digest information and practical tips for Australians with regard to their wealth, as well as having a platform on which to engage leading experts and commentators and leverage their insight.

About the author

Grace is a journalist on Momentum Media's nestegg. She enjoys being able to provide easy to digest information and practical tips for Australians with regard to their wealth, as well as having a platform on which to engage leading experts and commentators and leverage their insight.

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